Foreign Direct Investment And Economic Growth In Uganda (2002-2011)

ABSTRACT

The study is focused on Foreign Direct Investment and economic growth (measured by

GDP) in Uganda (2002-2011), the study employed time series survey data since it

examined data for a short time

Its objectives were; to establish the trend of Foreign Direct Investment in Uganda

(2002-2011, to establish the trend of Economic growth of Uganda ((2002-2011), and to

investigate the relationship between Foreign Direct Investment and Economic growth in

Uganda (2002-2011).

The hypothesis of the study was there is no significant relationship between Foreign

Direct Investment and Economic growth in Uganda. Time Series analysis such

Correlation analysis, regression analysis mechanisms were used.

The trend of Foreign Direct Investment and Economic growth showed a general

increase. lJsing the correlation, regression approach, there was a strong positive

correlation between Foreign Direct Investment and Economic growth(r=0.8202) there

was also significant relationship between Foreign Direct Investment and Economic

growth at 0.05 level of significant.

In conclusion therefore both Foreign Direct Investment and Economic growth has a

general increase, there is a positive relationship between Foreign Direct Investment and

growth in Uganda which agreed with Njimah et a~ (2009),Makii et a~ (2004) and

Borezstein (1999) study on Foreign Direct Investment and Economic growth this has

implied that Foreign Direct Investment play a very Important role in economic growth

of Uganda.

The trend in Foreign Direct Investment implies that as the interest rate reduces,

foreigners will be encouraged to set up industries and the reverse is true. The study

was guided by the cost of capital theory (Forgha 2009), since developing country like

Uganda cannot foster economic growth without Investment. Finally Uganda should embark much on the industrial set up since this employs a large number of people.